Keynote Panel 2016

“The State of Our Union is ...”

Four successful club owners—Rick’s Cabaret CEO Eric Langan, Deja Vu President Jason Mohney, partner in E11EVEN Miami, Ken DeGori, and Scott Lizza, owner of Monroe’s of Palm Beach—offered their views on the present, and future, of this industry.Of all the reasons people attend the Annual EXPO, our polls consistently show that the number-one reason is to network with fellow industry pros. At EXPO 2016, the format of “State of Our Union” panel is simple: “If you could ask one of the industry’s most successful operators a question about the current state of the industry, and what the future holds for it, what would it be?” This EXPO panel featured the aforementioned Eric Langan, Jason Mohney, Ken DeGori and Scott Lizza, all industry veterans and highly successful operators. Here, we’ve printed a portion of their EXPO presentations.

Ken DeGoriIn the summer of 1985, I made my way to Thee Dollhouse in Pompano Beach, FL, where my brother Dennis was running the club. That’s where I begin my love affair with the industry. However, I was quite unceremoniously dismissed after just two months there (laughs from the audience). Much to my shock and my dismay, the business somehow survived without me.In 1991, I returned to the industry at NYC’s Stringfellow’s Presents Pure Platinum, and was shocked that the industry had not only survived but thrived. There were subtle changes: strippers had become entertainers, customers had become guests, and monopoly money had replaced cash as the preferred form of payment. Much of the next 25 years involved me owning or operating clubs across the country, from New York to Philly, Las Vegas, Chicago, San Francisco and many more, and now Miami. I have seen a lot in these 25 years, from several different perspectives, from mega clubs to neighborhood joints, alcohol to juice. It’s my opinion that the state of our union is “stuck”—stagnant, stale. After all that growth from years ago, we are now little more than a one-trick pony. Add to that, increasing liability of entertainer lawsuits, stricter zoning laws, new legislation introduced regularly, pole taxes ... we have to start looking at our business through a new lens. A broader, more diverse lens. But it’s not all doom and gloom. There are operations across the U.S. that do very well. There will never be a replacement for that human connection. There will always will be people for whom making that connection is difficult. This is not all about tits and ass, not at all. Build it and they will come? Not any more. People require much more today, because so much is available with the click of an app. We can ask ourselves the right questions. In 2005, an article in Ink magazine said that Las Vegas’ entertainment revenues (food and beverage) surpassed gaming revenues. What was originally looked at as a loss leader in Vegas, now was the primary reason people were going. According to the Las Vegas convention and visitor’s authority, in 2015, what percentage of people were coming to Las Vegas for the purpose of gaming? The answer was 10 percent. It just seemed obvious, the answer was there all along. What about grocery stores? You went there to buy your groceries, right? Now you get your groceries, do your banking, pick up your prescription and get Starbucks on the way out. Obviously this is way oversimplified, but you understand what I’m getting at. In this industry, there is also diversification that you can follow. Tootsie’s in Miami [owned/operated by the Rick’s Cabaret chain] is a 70,000-square-foot virtual playground with a sports bar right in the middle of it, that offers food, several

other features. And the restaurant concept of Bombshells [also owned by Rick’s] offers a diverse business model for sure. Eric Langan gets it, follow that leader. Jason Mohney gets it. He and his father, Harry Mohney, have been innovating for decades. They never miss an opportunity, never leave a marketing stone unturned, never fail to try new things and new businesses (magazines, cam websites, etc.), they even have a great karaoke bar here in New Orleans. Follow that leader. Scott Lizza gets it. The Overall Club of the Year, as of last night [ED’s Awards Show]. Monroe’s has created one of the finest steakhouses in all of South Florida. Need proof? Maxim magazine compared it to the famous Peter Luger’s in Brooklyn. That’s a high bar. My brother, Dennis [DeGori], sometimes drives 90 minutes north just to eat at their restaurant. Speaking of my mentor, my partner, my brother, and now [ED] Hall of Fame inductee, Dennis DeGori gets it. his brainchild, E11EVEN Miami, was named Best Concept in the Nation by Nightclub & Bar—among all nightclub venues in the nation. All while having the benefit of 100-150 girls every night, and we don’t even mention the word “cabaret” in any marketing or promotion. I always follow that leader.Follow the leaders, look at what the successful operators are doing. There are just some times when things need an upgrade. Let’s toast to the future, because the past is done with us.

Jason MohneyI’m going to talk about fun stuff: Topless technology. We have a lot of technological choices for our clubs today, the software and technology that we use every day to manage our clubs and our money. LV Networks (Club Cam Systems) announced that they’re going virtual reality, where you can sit at home with virtual reality goggles and watch what’s happening in the clubs available through their site. That’s amazing, considering it was only a few years ago that they successfully launched club cams/online viewing. Thousands of people are watching their cameras now. The key to technology is to make it more interesting and fun for our guests, more user-friendly. It does us no good to have an app if it isn’t easy to use. Technology is not there for you to forget to talk to your guests, it’s there to help you talk to your guests.[Facebook’s] Mark Zuckerberg wants virtual reality in everyone’s house. But there’s a difference between virtual reality and automated reality. With this Pokemon today, do see all of these people playing it? How are you going to bring this into your club? That’s what the kids want, that’s the technology of today. They want an interactive game, so how can you make their phone part of their experience at your club? How about in the next five years? We’ve seen the “real dolls”; 21% of people said they would sleep with an android. Is it so hard to believe that they’d get a couch dance from one? I think not. Researchers in Russia are trying to make it so artificial intelligence can be social, can build your trust, and can show emotions. Sooner or later, that entertainer is going to be on stage full of gears and hydraulics. On cruise ships they have a robot bartender. You put on virtual reality goggles, the whole room changes. Far, far in the future? Uber’s goal is to make sure no one has a car anymore. Be like Uber, create the future. Do you think I’m a little nuts? In 1995 they thought the internet would not work, that it would not replace “normal” socializing. The kids of today are already used to video games and virtual reality, it’s ingrained in them. Don’t you think they’ll expect that when they become your customers?

Eric LanganFirst, the positives of what’s going on today. Our state organizations (ACE and other lobbying/organizing chapters)are getting stronger. New chapters are catching on, getting involved, lobbyists are being hired, and they’re able to change things. Clubs are looking at terrible state legislation every year, but we’re having more successes each year, fighting legislation and doing positive things for our industry. I encourage everyone here to get involved in your state, as well as with ACE National. Don’t just stand on the sidelines and leave it all to the big boys. There is something you can do to help, no matter how big or small that you may be. It’s about having a seat at the table, letting these legislators get to know us and “humanize” us. Now it’s time for the doom and gloom, sorry. But the next big challenge is here: dancer class-action lawsuits. We have some major decisions to make as an industry, you have a choice to make as individual club owners. The big problem is, there’s no miracle cure. I hear people say, if you go to the employee model, it’s all over. Sure it’s all over! You won’t have a Fair Labor Standard Act claim filed against you again.

I’ll have you know, the very first claim ever filed in this industry was against one of our clubs in 2009; and low and behold, it was the employee model (club in Minnesota). Now we settled because it was much cheaper than fighting it all the way through, but it was an insignificant amount of money. We went through a labor audit in Minnesota, and we were able to show how we did it was legal. So we know the employee model can work. But the employee model is also not a cure-all.With the independent contractor [non-employee] model, a lot of states are passing legislation related to this issue, and clubs are fighting this at a state level. State case are the worst ones, since they’re opt-out suits, where federal cases are opt-in. Bad cases come out of the courts, a lot of times that’s our fault (the industry, collectively). We look at the IRS version of what an independent contractor model is, but that’s wrong; we need to look at the Fair Labor Standard Act’s version of what an independent contractor is. There are economic reality tests, control issues, etc. We told entertainers they couldn’t use the phone while on the floor and they couldn’t chew gum, and that’s what they used against us. There are pros to both, negatives to both. Meet with your attorney, and don’t hold back. If you have “commitment sheets” for your entertainers, tell him. Our federal judge decided those were schedules.The most important thing is, whatever you choose, you need to do it correctly. That’s the main point to all of this. And you can’t copy other clubs’ contracts, because no two clubs do things exactly the same way. That entertainer is going to find the GM at your club that doesn’t know what he’s doing, get records of what he did wrong, and you’ll (lose that lawsuit). The contracts that people used four years ago are already outdated. You have to be protected, you must have the most current stuff. We change contracts every four months. Every member of your staff has to be trained to understand what’s in these contracts. Even if you win in a trial, if you go all the way to the end, you’re still going to pay 600 grand, a million or more in legal fees. You need to set up your corporations properly, to separate your real estate from your operating companies. You must have a good corporate attorney and document everything properly. RCI (Rick’s Cabaret) is looking hard at the employee model; yet, when we look at worker’s compensation insurance, state unemployment fees, etc., it’s still daunting. With the employee model, girls do a $20 dance, they get about $11. Girls can still make good money, it works well with our Minnesota club. But, ultimately, as an individual club owner, you have to determine what would work in your market. Whatever you do, follow the law and do it correctly.

Scott LizzaI got into the adult business in 1996; obviously, things are so different today. I was in the “regular” nightclub business prior to that, because originally I did not want to be in the adult business at all. At the time, my business partner wanted to go adult, so we contacted Michael J. Peter to consult on how to break into the industry. We thought we could make $12,000 a month; in the first couple of months we were making $12,000 a week. So I quickly changed my mind about wanting to work in this industry!Back then we were making money in different places. In our office we had a fine board; I think we made as much money off of fines as we did off of dances or even champagne rooms in ‘96. Dances happened on the floor. Then I got out of this business and got into the yacht business. I brought what I learned in this industry into the yachting industry, and it worked. Think outside the box. I was dealing with the upper portion of the one-percenters; people that are very big into guest service, they expect attention to detail, etc. The concept for Monroe’s came out of that experience, and out of a trip to Europe in 2012. We were there, building yachts, and seeing what was going on in Europe. I told my wife, we can make a lot of money in America with this concept. This new house music going on, it was going crazy in Europe. I decided to get back into the business. Monroe’s came out of nowhere in 2012. The thought process was simple: we believe that our industry is becoming commercial. The book and movie “50 Shades of Gray” helped double our market. In ‘96 we were marketing to men, now we market to both. We are 35% single females on the weekend. My son wants to know when Pitbull is going to mention Monroe’s in one of his songs. But you have to know your market, know what will work where you are. I like to lead by example. What are the needs for people to spend money? People need to feel safe. If people feel safe, and if they feel special, they’ll spend more money. That’s what we work on with Monroe’s, or Double Dee’s, or any of our ventures. Treat everyone with respect; guests and employees and entertainers. We’re sexy, not sleazy. We’re a full-gown club, because we feel like when we do that, our guests have more respect for the entertainers, and it creates safer atmosphere. We’ve created a team, a family. I want our employees to know that it’s about “we.” I work with my people.I’m very happy about where we’re at as an industry. But do not be complacent. Everybody can learn something every day. Or, do be complacent—we like when you’re complacent (laughs)!